ACTEC Trust & Estate Talk

Episode: Estate & Gift Tax and Charitable Contributions Under the OBBBA

Date: September 2, 2025
Host: ACTEC Fellow Natalie Perry
Panelists: Beth Shapiro Kaufman (Washington, D.C.), Stevie Castile (Las Vegas, Nevada)

Overview

This episode explores the significant trust and estate impacts of the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. Expert ACTEC Fellows Beth Shapiro Kaufman and Stevie Castile break down changes to estate, gift, and charitable contribution tax planning caused by the OBBBA—nicknamed "OB3." Their discussion includes legislative background, technical nuances, and practical planning guidance for wealth professionals and their clients.

Key Discussion Points & Insights

1. Legislative Background and Process of the OBBBA

Speaker: Beth Shapiro Kaufman
Timestamp: 01:44–13:11

• OBBBA’s Significance: The act is the most major overhaul of federal tax law since 2017, affecting exemptions, rates, and deductions.
• Estate & Gift Tax Exemption:
  • No more worry about the "sunset" of the doubled exemption (from 2018).
  • New exemption: $15 million per person, effective Jan 1, 2026, indexed for inflation from 2027 onward, and labeled as “permanent” (until Congress changes it).
• Budget Reconciliation Pathway:
  • Filibuster Avoidance: Opted for budget reconciliation (avoiding the 60-vote filibuster threshold in the Senate).
  • Byrd Rule: Explained how certain elements, even labels like the bill's name, were struck for not affecting revenues or outlays.
    • “One of the provisions that was stricken under the Byrd rule was the short name of the bill. …and so someone challenged it, and the parliamentarian struck it. So, officially, this bill doesn't have a name, which is why a bunch of us have decided to call it OB3.” (09:28 – Beth)
  • Parliamentarian’s Role: Elizabeth McDonough as key, non-political arbiter.
• Budgeting & Baseline “Scoring”:
  • Used a "current policy" baseline including prior temporary tax cuts (TCJA provisions) to make extensions appear costless.
  • Analogy: “When I went to the grocery store last week, I bought milk and ice cream…This week… the cashier says, ‘Oh, you don’t have to pay for those because you bought them last week.’ That’s what this is like.” (10:31 – Beth)
  • “If you use current policy as your baseline, then you could, for example, if you were Congress, pass a law and put it in effect for one year and it’s very expensive, but it’s only one year. Then the following year while it’s in effect, Congress could come back and say, we’re going to make that law permanent and claim that because current policy includes that one year law, they don't have to offset the revenue loss from the next year forward into the future.” (11:07 – Beth)
• Final Passage:
  • House passed by one vote (215-214); Senate passed 51-50, with Vice President Vance as tie-breaker.
  • No conference committee (“a little bit of arm twisting”) to meet President Trump’s July 4 deadline.
  • Final bill: $4.5 trillion in tax cuts over 10 years, $1.7 trillion in spending cuts.
• Estate/Gift Tax Planning Note:
  • The increase to $15M/person exemption is the headline for planners; vigilance still needed.
  • “Permanent means it’s the law until Congress changes the law.” (12:46 – Beth)

2. Charitable Contributions and Income Tax Deductions under OB3

Speaker: Stevie Castile
Timestamp: 13:43–18:50

• Suspension of Miscellaneous Deductions Made Permanent:
  • Affects estates/trusts—non-itemized deductions now subject to a 2/37 haircut.
  • Impact on Charitable Remainder Trusts and Estates: Section 642 charitable deduction is now cut, so trusts/estates payable to charity will still owe income tax.
    • Example: A trust with $370,000 income all payable to charity suffers a $20,000 deduction disallowance due to the haircut, reducing charitable funds, increasing tax, and creating a “circular algebraic computation.” (15:04 – Stevie)
• Changes for Individual Taxpayers (2026 onward):
  • For Itemizers:
    • Charitable deductions allowed only above 0.5% of AGI.
      • “If Jill’s AGI is $1 million and she gives $100,000 to charity, the first $5,000 will not be deductible.” (16:11 – Stevie)
    • Deduction value capped at 35% of donation—even for those in higher tax brackets.
      • “High income filers donating $1,000 would receive a $350 tax benefit instead of the current $370 tax benefit.” (16:28 – Stevie)
    • Good news: The 60% AGI limit for cash contributions to public charities is made permanent.
  • For Non-Itemizers:
    • Now permitted to deduct up to $1,000 (individual) or $2,000 (joint) for public charity cash gifts (not DAFs/supporting orgs), starting 2026.
    • Urged to “bunch” giving into a single year (including funding a DAF) to maximize deduction.
  • Planning Insights:
    • For itemizers: Complete large gifts or fund DAFs before end of 2025 to avoid new floor/cap (17:38 – Stevie).
    • Make substantial gifts in low-AGI years to minimize impact of the new 0.5% floor after 2025.
    • For non-itemizers: Delay gifts until 2026; bunch giving to maximize deduction under new law.
• Excise Tax Changes:
  • New excise taxes of 1.4% to 8% on endowment/investment earnings for colleges/universities with over $2M endowment/student.
    • Applies to 56 institutions now, more expected.
    • Institutions with <3,000 tuition-paying students are exempt.
    • Note: Expected hike of private foundation excise tax (to 10%) did not pass.
      • “There was a proposal to increase the section 4940 excise tax on private foundations… but this proposal did not make it into the final bill.” (18:30 – Stevie)

Memorable Quotes

• On legislative process:

  “It’s a little more complicated than Schoolhouse Rock made it out to be.”
  — Beth Shapiro Kaufman [01:52]

• On congressional budgeting tricks:

  “That’s what this is like. …You don’t have to pay for those because you bought them last week.”
  — Beth Shapiro Kaufman [10:38]

• On complexity for charitable trusts:

  “…You end up in a circular algebraic computation that makes the result even worse.”
  — Stevie Castile [15:41]

Important Timestamps

• 00:43: Episode introduction and context by Natalie Perry
• 01:44: Beth Shapiro Kaufman’s breakdown of legislative background and estate/gift highlights
• 09:28: Byrd Rule and bill “name” anecdote
• 10:31: "Milk and ice cream at the grocery store" analogy for current policy baseline
• 13:11: Transition to charitable deduction topic, introduction of Stevie Castile
• 13:43: Stevie Castile on charitable deduction and excise tax changes
• 15:04: Section 642 “haircut” example for trusts/estates
• 16:11: Example of AGI floor for itemizers
• 17:38: Planning recommendations for maximizing charitable deductions
• 18:30: Excise tax changes for endowments; failed proposal for foundation excise tax hike
• 18:50: Outro and teaser for next episode on opportunity zones

Tone and Language

The panelists keep their explanations clear, sometimes wryly humorous, and deeply practical, “translating” complex legislative mechanics into plain English for practitioners:

• Beth uses vivid analogies and asides to demystify legislative gamesmanship.
• Stevie points out not just the technical changes, but their often counterintuitive, practical impacts - especially for planned giving.

Summary for Practitioners

This episode is essential listening for estate planners and wealth advisors needing to adapt quickly to the new regime:

• The $15M estate/gift exemption is here to stay (for now), bringing relief but demanding ongoing vigilance.
• Rules for charitable deductions are tighter, with new floors, caps, and excise taxes on institutions—affecting trust planning and individual giving.
• Advisors should act swiftly (before the end of 2025) to front-load large charitable gifts or DAF funding for clients.

For further resources or episode follow-ups, visit actec.org.